Area's Caltex service station franchises part of buy-back plan

Transition: Caltex has confirmed a $120 million buy-back of service stations across Australia. Photo: Peter Daniels

Caltex will transition its franchise sites to company operations by mid-2020.

That decision includes its operations in the Port Macquarie-Hastings local government area.

The move is the result of a two year review of the company's convenience retail operating model, a spokesperson said.

"The review was designed to show which model will best deliver our retail growth objectives," the spokesperson said.

"The convenience retail operating model review commenced after the launch of our Freedom of Convenience strategy in 2015.

"This strategy has seen Caltex transform from a refiner-marketer to a company with a fuels and infrastructure business and a separate but interconnected convenience retail business.

"The operating model review determined that controlling our core business is the best way to achieve our retail growth objectives," the spokesperson said.

Company operation of this core business is key to accelerating the changes required to, provide a more consistent customer experience; roll out new platforms; standardise services; and, simplify supply arrangements, the spokesperson said.

Caltex has 810 retail sites across its network with 314 now company operated. This is an increase from 152 sites as at December 31, 2016 and 233 as at June 30, 2017.

The Caltex spokesperson said franchisees operate some 433 sites but could not confirm the exact number of affected service stations in the local government area.

Total costs of the transition to company operations is estimated to be around $100 million to $120 million, over the next three years.

The move will see Caltex introduce a convenience retail arm which, the spokesperson says, is 'an under-serviced aspect of the Australian marketplace'.

Our focus has been, since beginning operations in Australia in 1900, has been on fuel only. But the future is in convenience marketplaces.

Caltex

"Our focus has been, since beginning operations in Australia in 1900, has been on fuel only. But the future is in convenience marketplaces," the spokesperson said.

"Caltex has some 25 of our new-style convenience hubs (the nearest is in Newcastle) which provides a conbination of food to go, grocery items, barista-made coffee and a bakery.

"We will be looking to convert some of our existing sites to this style - labelled Foodary."

Franchising has been an integral part of growing the retail business. Caltex appreciates that this is a significant decision and it will affect many of our franchisees.

"Caltex will work with our franchisees to manage the impact of this change, including by offering franchisees transition support and offering employment to all franchisee employees," the spokesperson added.

Hastings Co-operative Ltd operates two service stations under the Caltex banner but will not be affected by this franchise buy out.

According to CEO, Allan Gordon, the agreement between Caltex and the Co-op is as a Caltex distributor and not as a franchisee.

Non-compliance

Meanwhile the Fair Work Ombudsman’s latest compliance activity report shows a workplace non-compliance rate of 76 per cent in the Caltex service network.

Fair Work Ombudsman Natalie James says, in light of this alarmingly high level of non-compliance across its retail fuel outlets, I am not surprised by Caltex’s announcement to the ASX last week that it will transition franchise sites to company operations.

“FWO’s report shows Caltex Australia has been presiding over a non-compliant and unsustainable operating model," Ms James said.

The FWO commenced investigations into the network in late 2016 after receiving intelligence indicating an upsurge in compliance issues at Caltex outlets, including non-payment and underpayment of wages; cash payments made ‘off the books’; false records; and threats of termination or visa cancellation for any workers who complained.